Under Section 24(b) of the Income Tax Act, first-time homeowners can claim a deduction of up to INR 2 lakh on the interest paid on home loans. However, this applies only to self-occupied properties. Each borrower can claim this benefit separately in the case of a joint loan.

Under Section 80C, you can claim a deduction of up to INR 1.5 lakhs on the principal you repay on your home loan. This includes payments towards stamp duty and registration charges, too.

While purchasing a property, you need to shell out a stamp duty and registration charges. Under Section 80C, you can get these charges deducted with an overall limit of INR 1.5 lakhs.

If you plan to use your property commercially by putting it on rent, you are eligible for an exemption from paying taxes on rental income. This is capped at INR 2.5 lakhs for both leased and self-occupied properties.

If you sell your first residential property and reinvest the capital gains in buying or constructing another residential property, you can claim an exemption from capital gains tax under Section 54.

1. Your Financial Health: In the first place, get your finances audited to get a realistic idea of your monetary health. Beyond the cost of buying a home, it’s imperative to list down the ongoing expenses to maintain the property. For instance, you need to budget for home insurance, taxes, repairs, and maintenance for the property. This audit will present you with a clear picture of where your expenses lie.
Refrain from spending your emergency funds to make the down payment. A sizable upfront cost is associated with buying a property. Start saving for this expense early on without disturbing your emergency fund.
Also, have a realistic idea of the amount that you would be saving each month. Accordingly, you can decide the amount you can allocate to manage your mortgage payments. Factor in all the expenses, like food, utilities, car maintenance, clothing, student debt, retirement savings, entertainment, regular savings, and other expenses.
Consider your credit score and debt-to-income ratio. While lenders prefer homeowners with a healthy credit score above 750, your debt-to-income should be less than 43%. Besides, try to limit your household expenses to less than 30% of your overall income.
To improve your eligibility for your home loan, consider paying off some debts to improve your debt-to-income ratio.

2. Consider the Right Type of Property Based on Your Needs:
Determine the type of home that would suit your needs once you fixed your mortgage budget. For instance, owners in India can choose from single-family homes, duplexes, condominiums, apartments, bungalows, villas, co-operatives, and multi-family buildings. Weigh the perks and downsides of each of these options based on your ownership goals.

3. Amenities and Features You Want:
It’s crucial to determine the desired amenities in your home since this factor significantly influences your lifestyle. For instance, most gated communities come with swimming pools, gyms, fitness zones, kids’ play areas, and open spaces for the residents. You may also want additional amenities like amphitheatres, crèches, or sports amenities. In case you are willing to move to a furnished apartment, consider the appliances integrated into the project.

4. Consider Lifestyle and Entertainment Expenses :
While calculating the amount you can afford for a mortgage, make sure to factor in your lifestyle and entertainment costs. For instance, how much would you spend for vacations, clothing, movies, utilities, and dining out. Since these are ongoing expenses, you need to allocate a fund aside to manage these costs every month before paying your mortgage.

5. Consider the Mortgage You are Eligible for:
Before hunting for your property, evaluate your eligibility for a loan and get a realistic idea of how much you qualify for. This largely depends on your credit score, income, and credit profile. Also, try not to stress yourself financially and consider your ability to pay the mortgage each month while determining your mortgage amount. Also, factor in your ongoing loan payments, since a part of your incoming funds would be used to clear them. Lenders use intelligent tools to carry out the necessary calculations and determine the mortgage amount you qualify for.

6. Seek Professional Support:
Consider reaching out to a real estate agent who would help you find homes within your range, considering your priorities. Professionals can even negotiate the price for you and guide you in the process of obtaining a loan. With experts on your side, it would be easy to carry out the paperwork. The expertise of a real estate agent can protect you from the pitfalls that you may encounter while purchasing the property.

1. Find the Property: Now that you are hunting for your dream home, consult your real estate agent, look out for listings, and search for a property that suits your lifestyle. Consider driving around neighbourhoods where the lifestyle appeals to you. Also, seek recommendations from your friends and other contacts as you look out for the ideal home. Before buying your first home, consult reputed agents to learn about price trends and the potential for value appreciation in specific localities. Professional agents work for the best interests of their clients, helping them find the right property. If you have budget constraints, look for properties where the full potential hasn’t been realized. However, shopping for undervalued homes requires experience, so make sure to reach out to your agent.

2. Consider Financing Options: As a first-time property owner, consider all your financing options as you brace up to buy your new home. Both banks and NBFCs in India offer low-interest loans to purchase your property. Most of these lenders require you to fork out a down payment of 10% to 20%. Alternatively, if you have accumulated adequate savings, you can finance your home yourself without taking a loan.
Funding from government-backed institutions: Government-backed institutions like the National Housing Bank (NHB) and Housing and Urban Development Corporation (HUDCO) collaborate with banks and housing finance companies to provide affordable housing loans to first-time homebuyers. Explore these opportunities to find affordable loans to finance your purchase.
Funding through retirement accounts: How about using some funds from your retirement savings accounts like provident fund and EPF to make the down payment? While it’s wise to save your down payment, you may have to access these funds to manage the payment.
State-specific funding programs: Look out for state-specific funding programs and financial schemes to purchase your new home in India. Through these programs, you can qualify for subsidies, reduced rates of interest, or assistance with the down payment. For instance, owners should check out programmes like the Mukhya Mantri Awas Yojana in Maharashtra and Gujarat and Gruha Vaibhav in Karnataka.
Specialized loans for certain groups: If you are wondering how to buy your first home on a limited budget, check out programmes like the Pradhan Mantri Awas Yojana (PMAY). These schemes offer subsidized interest rates and credit-linked subsidies for people from different financial strata.

While you look out for low-interest loans from reputed lenders, don’t overlook pre-approved loans. Even if multiple banks offer home loans at the same rate of interest, their processing fees and other associated charges may vary. Also, consider other costs like prepayment charges, penalties, and foreclosure costs. Ultimately, each of these fees adds up to your mortgage payment each month, making a substantial difference over the entire loan tenure. Also, determine whether you want to go for a fixed-interest home loan or one with variable rates of interest. If the ongoing market rates are high, it’s wise to settle for a variable-interest loan. This brings you the opportunity to reduce the mortgage payment in the future once the market rate falls. On the other hand, if you find that the current rates are historically low, go for a fixed-interest loan to lock your deal at a lower rate. Once you choose a lender and apply for the loan, they will verify your details including financial information, credit scores, income proof, and current liabilities. Even if you have a pre-approved home loan, your lender may scrutinize these documents to authenticate your claims.

Negotiate the Deal
Now that you have got the loan sanctioned from the lender, negotiate the deal with the seller. It’s wise to entrust your agent to make the deal with the seller, or their agent. Since they are aware of the market conditions, it’s wise to let the professionals strike the deal. This way, you can make significant savings on the property purchase. It’s wise to take a final look at your budget before submitting your final offer. Consider the property registration cost, which can range up to 5% or 6% of the property value, depending on your state. Other factors to consider include communication costs, repair or renovation expenses, and stamp duty. Even after purchasing the property, you need to manage ongoing costs like utility bills, tax, and insurance. Factor in additional costs like home inspection and the homeowner’s association fees while purchasing the property. Once you sign an agreement, you need to make an advance as a faith deposit. As your agent takes care of the formalities, you need to clear off the additional amount that you would be sourcing through the loan.

Inspect Your Home
While buying your first home, it’s important to get it inspected by a professional team. Apparently, the property may look flawless, but you need to be on the safer side when you make a substantial investment. The last thing you would want is to block your money in a substandard quality home that requires a lot of repairs. In case there’s a scope for repairs, get it done by the seller or negotiate for a discounted price for the property.

Buy the Property
After sorting out quality issues or potential repairs, it’s time to close the deal. Take care of the due diligence, as a lot of paperwork needs to be done. Your agent might recommend a lawyer to verify that the property deeds are genuine and that you won’t run into legal issues after purchasing it. For instance, lawyers carry out a title search to ensure that no other entity other than the seller has a claim to the property. In case you are paying a down payment of less than 20% of the property cost, the lender may require you to get a property insurance policy. Some of the other closing costs include title insurance, loan origination fees, expenses on taxes, surveys, and credit report fees.